A strike price, also known as an exercise price, is the predetermined price at which an option contract can be exercised. It represents the price at which the underlying asset can be bought (for call options) or sold (for put options).
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A strike price, also known as an exercise price, is the predetermined price at which an option contract can be exercised. It represents the price at which the underlying asset can be bought (for call options) or sold (for put options).
When the strike price makes the option have intrinsic value:
When the strike price equals or is very close to the current market price of the underlying asset.
When the strike price makes the option have no intrinsic value:
Symbol | Current Price | Strike Price | Option Type | Moneyness |
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Strike prices are typically set by the options exchange at standardized intervals. These intervals vary based on the underlying asset's price and the exchange's rules. Common intervals include $2.50, $5, and $10 for stocks priced differently.
The option premium is affected by several factors in relation to the strike price:
Selecting the appropriate strike price depends on your trading strategy and risk tolerance. Consider these factors: